Q2 2020 Western Union Co Earnings Call
Good day and welcome to the Western Union Company second quarter Twentytwenty earnings release Conference call.
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I would now like to turn the conference over to blending the channel Vice President Investor Relations at Western Union. Please go ahead.
Thank you.
Today's call will discuss the company's results for the second quarter of 2020, and then we'll take your questions.
So the company this call what jobs can be found that western Union dotcom under the Investor Relations tab and will remain available after the call.
Additional operational statistics.
I've been provided supplemental tables with a press release.
Western Union, that's still falling working on policy. So on a remote called today is our CEO hikmet are stuck our CFO Roger on the wall and had a perjury investor relations Brad one big one.
Today's call is being recorded in our comments include forward looking statements.
Please refer to the cautionary language in the earnings release and in Western Union's filings with the Securities Exchange Commission, including the 2019 point 10-K for additional information concerning factors that could cause actual results could differ materially from forward looking statements.
During the call we will discuss some items that do not conform to generally accepted accounting principles.
We have reconcile those items to the most comparable GAAP measures on our website Western Union dotcom under the Investor Relations section.
We'll also discuss certain adjusted metrics all the expenses that had been excluded from adjusted metrics are specific to these initiatives. The types of expenses. Maybe some are two types of expenses the company as previously incurred and can reasonably be expected to occur in the future.
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I will now turn the call over to artsy O <unk> or suck.
Thank you Brendan and thank you all for joining our earnings Cold. This afternoon. You hope you on your families are safe and well guarantees unprecedented times.
On today's call Raj I will discuss the company's performance during the second quarter underlying business conditions and plans to drive our go to started that your <unk>.
As you all are are there the second quote to come do you have to be up hiring time for people around the world facing to covert <unk> pandemic.
Oh, I sit dose dependent like Western Union took swift action to support the safety and go being all our stakeholders with a focus on western Union employees and customers, but also our agent partners and the communities your operating.
And we continue to operate the same diligence.
In addition, during the quarter concerns over social Justice came to the forefront globally with stealing has launched <unk> or <unk> equity and inclusion.
Our core to our mission is a global socially conscious company with a diverse customer base and workforce.
Or details about our holistic <unk> 90 response, and Betsy Union socially values. Please refer to our and you'll see report published in June and available on breast feeding Investor Relations website.
Let me tell you that I am personally <unk> I'm humbled to lead the company with the Gulf.
Now, let me give you some color on business performance.
On our first quarter earnings call in May we noted that well with my team had cold suburban and eat decline in our business.
The later part of March and early.
And let us to be drove our trade between to find Angela.
I'm pleased to say that since then our business began to bounce back or TPC segment finished the quarter with solar transaction growth of 6% in June.
Which increased 2% in July.
Our secrecy cross border principal increased 3% on a constant currency basis in the second quarter for June or seats as you Cross border principal grew over twice the person.
I'm also curious into July.
For the first part will be your our cross border principal grew 2% constant currency.
Starkly comes right with the goal bank for costs were up 20% decline in baby that this work trying to frame it which we believe indicates that we are winning in the marketplace for both retail and money transfers.
This isn't surprising to us.
You have invested substantially over the past the gate to people that leading omnichannel platform for cross border crosscurrents that money transfer payments.
It's usually can deliver money, it's paying them effectively through multiple channels more places than anyone else in our space.
So the disruptive impact of the current environment actually in the competitive advantage, our combined physical and digital capabilities.
<unk>, making good we've already been approval digital platform when consumers and quiet so foster convenient that reliably my thoughts the transfer money on their smartphone or computer.
This enabled strong digital customer acquisition, but the screen Dot com monthly average active customer up 45% year over year and according to the mobile marketing for sensors <unk> yard leading significantly in dong bodes well proceeding book or mobile compared with the pure money trends.
For a company.
The strong momentum, especially in dot com combined with acceleration in digital partnership transaction drove 50% constant currency digital revenue growth for the second quarter approximately $220 million.
Digital initiate the transaction accounted for 21%. She just see segment transactions up from 15% in the second quarter 2019.
Importantly, digital growth is largely incremental to our business and has strong appropriate and customer lifetime value.
Customers also knew they could turn to western union to send money ritually anywhere confidence given the quality of our network.
Most of our agents are well established essentially businesses like financial institutions, possibly institutions or large retailers.
So large madrid or agent locations have been open and able to serve customers during the crisis.
Unlike some other providers.
Our research shows they believe still far platform, but one of the written money transfer consumer, which who gets you need during the quarter.
Oh resilience over the second quarter shows the strong fundamentals of our business.
Which combined with the new boats why did you laid out at Investor Day lots September positions with Union for profitable long term growth.
For the second quarter revenue decline.
Adjusted constant currency basis, but group in June.
Well good did do business demonstrated impressive results retail trends.
Over the quarter and drove monthly improvement in overall CPC trends.
We continue to deliver solid double it with adjusted operating margins of 20.4% you too hard to the productivity savings and expense management enabled by the way lean program and organizational efficiencies.
We generated healthy cash flow returning capital to shareholders through our quarterly dividend and continued to maintain that strong financial position.
So our business moving into right direction consumer behavior appears to be relatively stable and the macro environment.
From the significant drop in March and April However, there's still uncertain fit from corporate 19, evidenced by concerns over the second and even turret gave some markets.
I think this conditions warrant continued caution and therefore, we are not issuing threat to treat the financial targets. Despite.
Got you provided a detailed review of our financial results.
For some additional insight into our expectation not you mean.
Looking for but.
You have a robust agenda for the second half year that should help positioned the company to emerge from this disruptive time, no very strong competitive position.
We will continue to focus on three key objective or new strategy.
Having digital drought.
Enhancing our global network and optimizing our organization.
The current environment has benefited the border digital money transfer market and not just from retail customers switching.
It is also bring in your comments you must have the market.
I'm from informal channels or banking system and others.
Recently developed needs.
To keep the restaurant dot com momentum going we will continue to invest in acquiring new customers and enhancing services like real time payments.
Our party partnerships have been a big contributor to our digital money transfer business. This year operating our unique cross border cross currents of Popcorn, who took part do you have done an excess who previously untapped segment of the Remington market that currently lights on cross one that bank.
While the sales cycle is somehow longer done agent signings, we have strong pipeline potential given its focus on financial institutions and the team dedicated to kept shouldn't be exciting long term broke apart from the <unk>.
Moving onto the network, we continued to enhance our interest the leading deibert local distribution network. So far this year you have renegotiated agreements it usually husband existing agents with more than 25000 locations.
At the over 60, new agents with 16000 locations and increased our real ECOMP pay off capabilities to over 60 countries and Oak June.
We also added additional volume heart capabilities.
So I am pleased with the progress you're in vivo compute the focus on improving coverage cost and quality to our network.
In business solutions, we continue to build it new ways to help isn't that the address their need for cross border services. You also can do you have to develop our payment net Bert and make progress on our edge platform that will enable customers for digital itself. So.
On the organization efficiency problems are way lead an effective management mindset has enabled good progress in creating a more effective organization.
We are on pace to below at least $50 million, new productivity savings be targeted for this year as well.
See your target.
Moving dollars.
In closing.
I'm very pleased with our performance under challenging circumstances in the second quarter, while macro uncertainty remains we are focused on serving our customers globally and executing against our growth agenda for this year.
Looking out longer term.
We are well positioned in the resilient market.
Strong financial position and we are pursuing a growth strategy that will enable us to drive meaningful profitable growth for years to comp.
With that I will turn to go over to Raj.
Thank you had made and good afternoon everyone.
My comments today, we'll start with the second quarter performance of our business and then I'll offer some thoughts on our expectations for the remainder of the year.
As Hikmet discussed earlier, we faced a challenging business environment in second quarter. So we are encouraged to see faster improvements in our business than we expected just a few months ago accentuated by positive consumer transaction growth was very strong cross border principal girls injured and July.
Second quarter revenue of $1.1 billion declined 17% compared to the prior year period prior adjusted constant currency revenue, which excludes the 2019 divestitures declined 11%.
Currency translation that are being factored hedges reduced second quarter revenue by approximately $46 million compared to the prior year, primarily due to the depreciation of the Argentine peso.
And the consumer to consumer segment revenue declined 12% or 11% on a constant currency basis due to that transaction declines and other mix impacts.
Transaction declined.
8% for the quarter driven by decrease here in the retail business, which were primarily attributable to reduced consumer mobility, resulting from corporate 19.
Retail transaction declines were partially offset by the exceptional growth in digital money transfer, which I'll elaborate on shortly.
Drilling down into the business as conditions stabilize and economies began to reopen over the quarter, we saw substantial and broad improvement in trends across our geography and channels.
We ended with 6% transaction growth in June and carried on with 10% in July which were somewhat bolstered by at holiday benefit.
Total CDC cross border principal increased 1% on a reported basis or 3% constant currency with principal per transaction or ppt up 7% or 9% constant currency.
The increase in PBT was primarily due to higher PPG and our retail business, which we believe was largely due to a shifting customer mix and changes in customer behavior.
Ranges in the mix of our digital money transfer business also contributed to the higher keep the key notably more account to account transactions and digital partnership transactions.
The spread between CDC transaction and revenue growth in the quarter was 4% or 3% constant currency, which is largely attributable to your mix shifts in our business from faster growth at certain digital transactions with lower yields.
Digital money transfer revenue, including Western Union Dot Com and digital partnerships increased 40% or 50% constant currency and accounted for 22% or total CDC revenue or 31% CDC transactions in the quarter.
The spread between digital revenue that transaction growth was attributable to your greater mix of digital partnerships and strategic pricing actions for Western Union Dot com.
We continue to drive forward with our dynamic pricing strategy, which focuses on agile pricing capabilities to drive more customers transactions AD revenue over the long term.
Western Union Dot com revenue, 33% or 34% constant currency with cross border revenue up approximately 40%, partially offset by continued dramatic decline.
Western Union Dot com transactions increased 50%.
Our digital partnership business continued to gain momentum in the quarter I've transactions ramp up in our digital white label business.
Turning to the regional results in most geographies and channels trends improved sequentially from lows in April to June and into July.
North America revenue declined 6% on a reported basis and 5% on a constant currency basis and transactions declined 7%.
Both revenue and transaction trends improved steadily each month throughout the quarter.
Your cellphone girls was largely offset by declines in domestic money transfer with digital continuing to drive the result.
You asked domestic money transfer continued to weigh on revenue results. It's only 5% of total company revenues now and will likely be less meaningful overtime.
Revenue into Europe, and see I asked region decreased 10% on a reported basis or 9% constant currency transactions grew 4% due to strength in Russia benefiting from this fairbank partnership.
<unk> digital growth was more than offset by retail declines.
However, we are encouraged to see retail transaction trends in troops throughout the quarter.
Indeed, some countries, including Germany, and Switzerland, even had transaction trends that were better than three togut. It seems that Europe is benefiting from a strong social safety that in many countries, which should help to maintain stability along with strong customer acquisition.
Revenue in the Middle East Africa, and South Asia region decreased 13% or 12% constant currency and transactions declined 1%.
The spread between revenue and transaction growth was attributable to strong growth in Saudi Arabia, driven by our partnership Saudi Telecom.
The rate experienced softening trend and service related industry slowed in the quarter.
Revenue in Latin America, Caribbean region decreased 45% on a reported basis or 35% constant currency on transaction declined to 41% acquired in the region, where do you too restrictive government policy responses in many countries, we anticipate that recovery in this region be lackey to it later on.
Cobot 19, more restricted government policy responses and a smaller social safety net actions.
Revenue in the APAC region declined 14% on reported basis for 13% constant currency on transaction declines of 18%.
On a positive note, Australia, which is an important market grew both revenue and transactions in the quarter, including for retail.
There's a solutions revenue decreased 17% on a reported basis for 15% in constant currency and represented 7% company revenues in the quarter revenue declines were the result of softening trends in verticals with more exposure to cobot 19, including education travel and tourism.
And small and medium sized enterprises.
Other revenues represented 5% total company revenues have declined 56% in a quarter or decline was largely due to the 2019 divestitures Impacter cobot 19, and depreciation of the Argentinean peso.
Other revenues primarily consists of retail dole payment in both Argentina on the U.S. as involves money orders.
Turning to margins and profitability I will focus on consolidated margins as segment margins are not comparable with the prior year period due to the divestitures of expense allocation changes implemented in the first quarter of 2020.
Consolidated GAAP operating margin was 19.9% of a quarter compared to 19.3% in the prior year period.
The increase was primarily due to productivity savings and additional cost management measures, partially offset by revenue declines associated with cobot 19, and the 2019 divestitures.
Additional cost savings realized quarter reflect both the timing of certain expenses and specific actions such as delaying hiring limiting travel reprioritizing investments.
We incurred $5 million restructuring related expenses in the second quarter related to our productivity program. We continue to expect total restructuring related expenses of approximately $150 million and today, we have incurred $131 million.
Adjusted operating margin in the second quarter was 20.4% compared to 20.3% in the prior year period with expansion driven by the same factors stated previously and adjusted for restructuring anemone costs.
Foreign exchange hedges provided a benefit of $7 million here, the current quarter and the benefit of $6 million in the prior year period.
The GAAP effective tax rate was 16.2% in the quarter compared to 17.5% in the prior year period, Robbie adjusted tax rate was 15.7 per cent compared to 16.8%.
In the prior year period.
The decrease in GAAP and adjusted effective tax rates was primarily due to the effect of that 2019 divestitures.
GAAP earnings per share in the quarter was 39 cents compared to $1.42 in the prior year carrier.
Or decrease is primarily attributable to the gain on sale from the divestitures and screenwriting add to a lesser extent hurt your revenue declines associated with target 19, you're on the divestitures partial offsets include productivity savings additional cost management measures and lower share count in the current year period.
Adjusted earnings per share in the quarter was 41 cents compared to 45 cents during the prior year period with the decreased due to the factors stated previously and adjusted very gain on sale and restructuring M&A costs.
Turning to our cash on balance sheet year to date cash flow from operating activities was $348 million.
Capital expenditures in the quarter were approximately $49 million at the ended the quarter, we had cash of 1.2 billion dollar and debt of $3.1 billion.
Our financial position is among the strongest in the industry, we have an undrawn $1.5 billion revolving credit facility and no significant debt maturities until 2020 tier.
We returned nearly $93 million dividends to shareholders in the second quarter and the share repurchase program was on par.
Yes, ending share count at quarter end was 411 million shares there and we had $783 million remaining under our share repurchase authorization, which expires in December 2021.
Now moving to our 2020 business update as Hikmet mentioned, we will not be providing an outlook at this time, but instead will provide some perspective on the second half of the year.
We consider a variety of forecasting form our understanding of the economic environment, how it will in fact revenue generation.
We think the prevailing macro outlook for gradual improvement over the second half of 2020 gives a reasonable baseline surety business.
However, we anticipate some quarterly variation relate it to grow over in the digital white label business and strategic pricing actions taken in the second half or 29 team.
Additionally, we recognize that recovery may not be linear in certain geographies.
Well I seem to see segment, we expect the overall remains market will be down for the year over the World Bank card for 2024 cap, which calls for a 20% decline in total cross border principal appears to present itself.
Our total cross border pinpoint grew 2% on a constant currency basis in the first half of the year and grew over 20% in June and July.
Based on these trends, we think we're gaining share in the market.
Lastly for our business solutions segment, reconsider global trade forecasts or projections.
And the prevailing view calls for gradual improvement in the second half of the year.
Moving to margins, we believe that we can deliver solid margins in the second half of the year, despite softer revenue trends.
As we mentioned last quarter, we have a flexible cost structure.
55% to 60% of our costs are variable and 40% to 45% architects.
Additionally, we are still on track to reach out reached $50 million in cost savings in 2020 and May realize more based on recent shifts in timing of initiatives and investments we continue to target of $150 million of annual cost savings through 2022.
Furthermore, we will manage cross appropriately with the revenue environment.
For example, we increased marketing investment in Western Union Dot com from the first quarter to the second quarter two addresses the growing digital opportunity.
If business trends continue to improve investments could potentially increase in the back half a year.
Finally, we expect fro, the gap and if adjusted effective tax rate to be in the mid teens range for 2020.
To recap we are pleased with our results.
This quarter in a very challenging environment delivering solid margins impoverished transaction go for June which continued into July.
We see these as major wins given the current backdrop and believe that indicates we are probably outperforming the competition.
Moreover, we think the exceptional performance of the digital business. This quarter confirms the digitally focused strategy, we laid out last year and has us on the right path to drive durable long term value for all our stakeholders.
Thank you for joining our call today and operator, we're now ready to take questions.
We will now begin the question and answer session to ask the question you made press Star then one on your telephone keypad.
If you are usually speakerphone, please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then too.
This time, we will pause momentarily to assemble our roster.
The first question comes from since Jen Wong of JP Morgan. Please go ahead.
Hey, good afternoon. Thanks for all the details you can hear me I know last I hear but.
The.
I think about how has this quickly so transaction growth fixed and in June and July sounds like principal growth is up 2% first half multi year, but you're expecting it to be down for the full year. So just trying to think about that dynamic and ask maybe able to is there a danger to assume the.
The six ish percent continues there into the into the third quarter here I'm, just trying to think about why.
Why that might not be a good proxy for for the near term.
Yeah, Hi pay attention, it's Rob just let me just try to address a couple of points there.
On that cross border principal growth of the Royal Bank of that minus 20.
And we think that's quite pessimistic were not going to be at minus 20, we think that's a market will decline. This year, but are there foot wide range of estimates on where that will be.
In contrast that with what were experiencing in the first half of the year, we grew low single digits and our cross border principal and that was up over 20% growth in June and July on the cross border pets fall. So that's what leads us to believe that we're heading in a very different direction from a principal growth standpoint.
And then on transaction growth June was six July was 10 July did benefit from summer holiday impact, but it was pretty consistent if you adjust for that so what we saw in June now what we did say I said in my comments that in the second half of the year, we'll we'll get the natural grow over from the digital.
Label business, which began largely in the third quarter and then more so in the fourth quarter and there were also continuing to do our dynamic pricing are behind us, we dot com business, which obviously is translating into a lot of customer acquisition and a lot of revenue, but that we had higher pricing in Q4 of last year, particularly in dot com.
So that's also going to grow over.
And the second half this year, but we're still going to get very strong transaction growth and you know we feel very good about where were the euro is going to thus far.
Okay Gotcha gotcha them as my follow up just the White label business would you just alluded too much that there was pretty big doubled sequentially I think.
So big performance there I know the comps are going to get a little tougher, but I think you talked about a pipeline.
I'm just curious if you can maybe.
That will give us a little bit more detailed is it more.
Bank oriented partnerships or text partners or telecom partners, just anything else you can share there would be great. Thank you.
Sure.
I'd say, we're very happy with the performance of worldwide level, It's a new business for us it's incremental business for us.
It's incremental transactions and we're really happy.
Happy with the performance and we did add some white label partners and our from is it takes time that's due the new partners also contribute to that success. The main success comes from the existing partners, but the new partners like in South Korea, and Japan, We added that'd be how about also a pipeline of you know adding new.
These are mostly as you said.
Tinge and is our most financial institutions.
There, we believe that you have a better service and the correspondent banking ports and lets you and the team is dedicated on that also kind of financial institutions. The telecom background, but wallets are all seem sort of sitting all white labeling on our platforms to serve their costs money in a better way so I'm excited.
Let me jump up our onto his team being a good job to get new.
New partners here and but the same sales cycle.
You know, there's a little bit longer here, then signing an agent because you have so as a financial institution you have to have added up to your system. So our systems and it takes a little bit longer, but you know exactly opportunity.
All right.
Great. Thank you for the update.
Thanks tension.
The next question comes from Darrin Peller of Wolfe Research. Please go ahead.
Hey, guys banks nice to see these trends you know I want to hone in on the mix on the digital versus the cash for the retail side. It looks like these customers are new customers coming to your business and so.
We think about that what does it 30% of transactions on digital driving your overall transaction growth to the high single digits.
It looks like there's about a four point spread between transactions and revenue.
Should we be counting on like just the you know more sustainable higher growth profile for transactions now into the second half in longer term.
In other words are these customers that have come on our they actually knew from tier business from other single Carter players are banks and are there any reason why they're not going to keep you're not going to keep having a call it 30% mix on digital.
Yeah, Hey, Dan. This is Raj Yeah, we're very excited about digital growth. It really is doing even beyond what we had initially expected coming into this year. So we're very pleased there.
A couple key data points, and then I'll get back to your mix question, 80% of new customers that are visiting us on mood Dot com, which is the lions share of digital continue to be new to Western Union real they have not used us in the past couple of years. So it's largely a new customer they seem to be either new customers.
The category. So they haven't use money transfer before they haven't identified themselves that way or they're coming from other parts of the remittance market, maybe from the banks and other digital players. So you know and it seems to be at very high quality customer, they're sending high principal amounts per transaction. They also seem to be transacting at a.
A high level or at least at the same level that we have our current customers and as we survey them. Most of that have said that they're going to continue to utilize.
Western Union.
In the future their needs.
Are there.
Sorry, we have some jets flatten over here, but the on the on the mix question I think you're going to continue to see transactions Ah grow faster than revenue just because of the digital white label mix and the overall dot com.
Based on the overall business.
But we're pleased with the overall trends and some of its going to depend also darrin on how fast the retail business comes back right because that has a different mix impact so that that's the part.
That's also interesting and I'll go digital is driving a lot of the growth here in recovery. It is also coming some recovery in retail because digital has stayed in the 100% range last few months, but retail has been steadily gaining back where it was before.
Okay. So I mean, it does seem like the mix assuming retail is coming back the mix could stay a little more you know position towards digital then really ever you you've ever had before by pretty decent amount I guess I'd just I'd be curious to know number one how much stimulus as you think stimulus and help that trend.
And maybe just the overall transaction trend from you know into maybe May and June and even into July perhaps.
And then maybe just remind us lastly, a yield differential you guys calculated between new dotcom and your traditional retail business I know the the bank side, the white labels lower but really mood comedy is the lion share. Thanks, guys that have ready to run a certain first and then I can take the I. I think the mechanical parts you may get yield far drugs is going.
Okay.
So oh from the I'm, maybe like the government actions, obviously, which helps the economy and helps people who have you know who need money, obviously, but we don't see the big difference MBS. The customers. They are here to support them. A you know it doesn't have died.
[laughter] doesn't have direct impact the stimulus packages to there a you know sending principles I think we asked them their support the their loved ones and that's great New customer acquisition earlier I mentioned, they do have an impact to our higher principal amount.
And they are new customers that they have a different behavior day, our new our segment, which is great. It's incremental they do send hired principles and so but stimulus package is generally our goods. It may have a little impact, but I wouldn't say that the performance based on stimulus package I believe that.
In this kind of like is the customers are looking for a trust the Brent.
They are looking for a network, which is globally everywhere.
So that's why we are gaining here you know I believe market share.
And Roger you want to Yeah, Let me just yeah, Yeah, a couple of additional key data 0.7.
The digital business in total and this quarter was about 22% or consumer revenues and that's up 900 basis points from where it was a year ago in the same quarter.
And while that growth is taking place your overall margins for the company has obviously expanded slightly so just keep that in your mind as I described some of the economics here, okay can be quite attractive to western Union the unit economics.
On the Western Union Dot Com side, which is the lions share of digital are actually quite similar to what we have in retail now you have averages of highly spend the money how your funding in the later playing out in the quarter is involved a dollar contribution on a gross margin basis.
And the percentage contribution are very similar between retail and digital rights that are we dot com business.
Because we really look at the marketing spend that we're having here as part of it was really an enterprise wide spread I because that marketing spend overall has been shifted more towards digital but it hasn't really increased or they have all companies to the profitability would I was very strong and on digital White label. We have we really are playing a different roll right.
There were a processor in the transactional we're not we're not paying for the acquisition of customers, we're not paying for the fraud losses. So we're really getting a customer deliver that has good funds that wants to move money. So it's a lower starting point from a revenue per transaction standpoint for us, but we also have much less in terms of costs. So it ends up being a very high margin.
At least with examples we have thus far on the digital white label side, So very high profitability on both those businesses largely incremental and that's why you're seeing the overall results that we have for the company.
Next question comes from Jason Kupferberg of Bank of America. Please go ahead.
Hi, This is catsix on for Jason.
I wanted to ask I'm, a little bit more to get a little more color about the growth within a specific Florida is our geography, I know you guys said and sort of broad based strength, but just wanted to know trends specifically in Europe, and North America and on that same there and I kind of wanted to ask if you potentially see any threat of trends of our thing, especially for us.
Areas, where economies are potentially be clothing of policies are being more restrictive. Thank you.
Sure Yeah, just in terms of trend you know, we really because we have a global business, we see different trends in different parts of the world, but generally I would say we saw broad based improvement through the course of the quarter. Each month, we saw successive improvement across most of our key geography as well as most of our.
A key channels. So that's the backdrop of what we're talking about some regions like Latin America did not perform as well as others because they were low later to see the Colgate issue and.
You know there their economic situation there was not as strong if you will going yeah, but they also improved during the course of the quarter in Europe, as I've mentioned, Germany, and Switzerland actually did better than we were seeing before Colgate even hit.
And.
So I think in terms of how trends will continue we'll see a June and July we're certainly similar in nature and quite stable.
Digital has has trended in the 100% Ranch my transaction standpoint for quite some time now for the last few months in retail has been improving since then so you know we're not giving an hour because there are still some uncertainties in terms of cold in the second or third ways and how that might hit and we just need to see how the.
Economic situation around the world plays out, but you know, we're very pleased and I think that the cross border principal girlfriends really strong in June and July it was well over 20%.
So I think that's a very big positive here and it really speaks to our gaining share and this status.
Yeah, Thanks, and just following up on that I know, you're not giving outlook, but just wanted to know sort of some of the puts and take that we should think about for threeq and Fourq you. Some of the restructuring should get some benefit in the back half of the year No tell me that play sequential revenue growth and margin growth going forward. So exciting times the about me.
Got you like transaction barrel, it's just a little bit more detail. Thank you.
Sure Yeah, I think as I mentioned in my comments, we will see some grover impact on the digital business because of that.
The growth that we had in the second half of last year, that's where they began its for the most part so that's been a certainly have a adrover impacts the margins I think it's hard to say it just depends on the revenue picture.
We can certainly control the cost side, we're doing very well and the cost side, but the revenue will be a key determinant hardware margins go regardless, we based on the year to date experience and margins. We think we're going to deliver solid margins for the full year.
Exact level is gonna be obviously, depending on revenue and where that comes out.
The next question comes from Rayna Kumar of Evercore ISI. Please go ahead.
Good evening. Thanks for taking my question, it's really get to see that 50% federal money transfer revenue growth I'm. Just wondering on a lot of your competition is also called out strengthen digital tape out calling out.
Fall into Donald Trump do you earn out and Moneygram also I'm speaking about strength and that you don't now that you're also seeing sustained agile and grow can you talk a little bit about what distinguishes your digital platform versus your competitors.
Sure, let me take up on that much in late Q.
I feel pretty good that's something that's good question actually.
Look I thought our business we are all this leads.
Moving money cost, Puerto Ricos turns and we have flown the.
Be unique see unique platform to move that be president in 200 countries and our digital send function is in 75 countries. Nobody has that I got up to my understanding worldwide and that gave us the very strong diversification of our portfolio growth, we are definitely growing with Q.
The person, it's a great growth, but I'm pleased to understand also you know if you compared with other competitors in alone in 2019 be already had 600 million dollar revenue. So we are going for most huge behaves a little bit down we are going very strong and I believe that'd be a leading the industry Soviet specialists on cross border crosscurrents. It as you know.
So our domestic we are not that's a in especially is on that already just domestic money transfer business is only 6% apart total revenue and it's declining but you know the cross border is going very possible. This is where our strength is besides that also are a white labeling is growing very fast ending.
Each time section transaction growth to our digital growth. So we are very satisfied with that why RV different than the competition look we have a pay off network. This unique.
You have 550000 locations. So you can send money from New York immediate the form your mobile phone that somebody embalmed action docket can pick up in that model a moment money then local currency in cash you can send money from Australia somebody in Argentina can get done on a comp you can send money from Finland somebody in Brazil.
And on a comp so I think the diversification of our portfolio of 550000 locations billions of at comps and then real time makes a bit different than that takes time to build that I'm competition has huge huge wait to get there. It will take them a a time and that makes us unique.
That's very helpful and just a follow up but after yesterday you still heavily about your dynamic pricing initiatives can you talk a little bit about what I'm TV, you've seen midyear transaction grout omnicare actually tied to this initiative and also are there any other cargoes are channels that you plan.
On implementing dynamic I think in the near term. Thank you.
Yeah, I think we gave you have good results on dynamic pricing, so we could see that.
The customers are really shopping looking at around and the dynamic pricing through the helps us as you know that prices has been very stable over the few quarters and type thing.
Obviously, our business those been comprising the site very stable you know the people really like if you could see that also formed app download stride mobile app downloads, we are leading the industry by far as you could see from dosage form the market's research stare at the present on the slides, so I think dynamic pricing brands truck hubs.
To position us in a different way than the competition, we do corridor pricing to be dual channel pricing be dual SSID corner pricing be ethnic phrase it can be business promotion pricing be do holiday pricing. That's in 200 pump is for 2000 corridors and business driven really by.
Bye.
Very good intelligence and we are advancing that by month by by unit by a year and you know really diversifying our portfolio with dynamic pricing.
And one other plays you can see arena directly is the customer growth, we had dot com. We had average monthly active customers go up by 45% from last year. So that really is a good great results of our dynamic pricing, where we want to make sure we get that last customer transacting with us start really show.
Going up and the customer growth as well.
Great. Thank you very much.
Our next question comes from James Offsets of Morgan Stanley. Please go ahead.
Great. Thank you very much appreciate although the color in detail on on kind of the ebbs and flows in and the dynamic nature of traffic, particularly over the last few months I'm wondering as you look at those tropic and traffic patterns, where you're seeing kind of a resumption of of previous patterns.
But you can identify and and really as well how you're thinking about the things you would like to see your need to see in order to identify new ones, especially given how dynamic the all the the current environment is.
Yes, James Let me, let me start and maybe you can add in there I think were in a word error period up a few months here, where we really have not seen thing would be the way they used to because we've seen a significant acceleration of digital most customers coming to.
Digital it's true still new to Western Union and are actually transacting high principal amounts there transacting at least at the level, it's not higher in terms of number of transactions per customer and so I think that's very interesting for us we've grown customer I cannot average customers more than we've seen.
In the past, we have a mobile app downloads that are way above what we've seen some some of our tier. So all those things are new to absolutely love it, but it's really going into right direction and with the P.T. level in the retail side.
The principal per transaction is it grew more than we've seen in quite some time, so that certainly speaks to the higher income senders, sending more money than they historically they are set continuing to send money because they have the ability to we have new customers coming into the category. There also back that's where changes the mix.
And we're getting a lot more account payout to which is higher principal amount. So well just some of the things that have changed and it hasn't really dropped back to normal you. All that's that's something that were very excited about what we seemed last couple of months.
No landing old Navy.
Jamie just add on that look it's a week you know Colgate Lincoln environment, it's definitely different than marmot, but didn't happen to us from public Reits you've already with our.
Acquiring new customers as you know.
Pre called with might give you had very strong growth on our digital business already and the <unk> 19, obviously environment brought us new customers, which they look for trust.
Coverage and a you know new type of customers, which they did indicate what how can I send money not my loved ones right. The first thing as you could see the for mobile app downloads and from Google search. The burst think they'd sold was immediately but see any of that brought us new customers under the right direction, because you've already be dark digital.
Money sensor.
Got it got it and then I'm wondering if you can.
Speak to your you highlighted a little bit what's going on in Europe than other places, but I'm wondering if if there's anything that you can draw in terms of correlation at least for maybe causation in terms of different openings or closings of regions and core and and what the impact is on corridor behavior.
And anything that they could be drawn from that perhaps.
Let me start drugs you may add one the first of all or most of our location seen as an essential business.
You know if you compare relative to competition most of our locations have been open because our retail locations our banks post offices on big retailers seem as an essential services. There were some lufthansa country looked onto not confuse you couldn't get out of that impacted our business, but generally.
Third April you could see that that this customers came back regionalize, you'll see that Europe is in a you know as Roger mentioned, though need like Germany, Austria. They this call, Switzerland, They had a better growth rates before Colgate 19, part two of them down new customers even into retail apart.
Two of them are you know coming to us because they are.
They don't see it.
At the level, they can send money a bit their existing methods or some of the competition had some issues here.
On the regional area, I would say that Saudi Arabia, and the Middle East area helped us a lot with our white labeling.
Europe is really a recovering everywhere in digital going very strong Olson retail it can make strong you efforts on has been very strong and has been a positive one lifting America has been a small 6% about 6% Aparthotels sends revenue. It's a small part of that I'm also.
Asia this more part of that but main regions like them.
Well follow ups bonds Europe on North America Upsilon has been doing really good and recovering enough very Pos piece Raj you want to its something.
No I think you covered most of it.
The next question comes from Ashwin Shirvaikar of Citi. Please go ahead.
[noise], Hey, I imagine.
I Hope you can tell you asked for now yeah.
[laughter] I'm I'm good without power at an internet, but you know I heard I heard [laughter]. Thank you joining oh.
Sure absolutely I guess the question is a you know that kind of looking at your best performing Geos from the transaction growth perspective, and so you know pretty pretty good turning around in those sneaking up you can see I ask middle East Southeast Yeah. What I heard was is that the lodge difference.
The transaction growth can you.
They haven't you Bill is something that you would have expected.
Because of the.
Sort of the progress it felt like they were partners.
Are there any kind of volume thresholds that anything on those you know on those sorts of partners. Maybe you can maybe close the gap or no can you tell us about the progression of how some of these walk because they it as they get bigger.
Yeah, I think don't don't think about it in terms of.
Closing the gap action because as I described earlier, the western Dot Com and digital White label are very profitable to western Union, that's largely incremental business. So we can compare to other components, but as we add incremental business, it's incremental revenues.
Profits to Western Union, and we play a very different roles you look at the top line or revenue per transaction in digital White label, it's going to naturally be lower than the rest of our business because of the processor role they were playing.
Because we don't have the customer acquisition cost, we don't have the fraud losses. Other expenses then.
During that kind of business. It really is a good customer that's being delivered to us that we are moving money for and the rest of that process is relatively low cost so whenever being a very high margin.
Yeah on a dollar contribution you know is gonna be different than the rest of our business from the white label, but some of them actually are quite profitable and not too far away from the rest of our business. So I think it just depends and we look at it really as being good incremental business for Western Union, not really about closing the gap because I'm not sure what.
You mean, but there's not a gap to close it's a different business models are completely than what we have.
Hi.
Just a purely processing got that.
And then on the business solutions segment that you.
Over the last couple of he has done a pretty good job, knowing the cost base and cost structure there.
Yeah.
To what extent is is the current and packed sort of you know there's no shut downs incomes of what fee.
You know, what's the outlook there because that could make the incremental margin said if the volume comes back can be pretty good.
You know you're pretty much all predicting a Canadian fixed cost base is basis right. Now can you talk a little bit about the outlook there.
No I can't talk generally about the environment of the environment is larger chemetall on the call. Yes, maybe so generally I would say that Ah you know business a solution.
You said earlier drunk right, but they did get impact by the Cobiz 19 impact.
It should be some parts of the verticals like to students pay had some impact because look to a lower applications for students international students studying.
Because of course 19, and some import export how did impact, but I have to say that also independence solution being started to see improvement.
Coming to the lots, but still you know it's still into a challenging environment bumping business solution I am I would say that the import export environment has been.
Challenging within that are beginning to call with my team as an industry has it.
Yeah now based on the margin side [laughter] Nash in Europe, you're absolutely right as a business performs as we get revenue growth there given the structure of the costs that are more more heavily sex and that business than other parts of our business, we should start to see that improvement again.
I would say that margin performance overall, when you look at our year to date basis is actually going around the 19% range in terms of EBITDA margins. So it's not where it was sort of full year last year, but it's also not.
That down given everything that we've experienced so yeah as we get better revenue growth, we should have better profit performance there as well.
Next question comes from Jeff Cantwell Guggenheim Securities. Please go ahead.
Hi, Thanks for taking my questions I appreciate all the new data, you're giving us I appreciate it.
Our July numbers as well I just.
Question on your Boo Dot com opt out knows which which is something that we watch pretty closely.
How should we be thinking about at the number of monthly downloads that you think you could generate shorts books locked down.
Are you optimistic that your peers high number of downloadable dot com and if that's the case can you maybe elaborate on where those downloads, but most likely be coming from a data points you can share with us there would be very helpful.
Thanks, Yeah. Your clearly you watch very closely Jeff you know I think they and those are quite specific questions. I think we well certainly things about the especially I would say in general our app downloads had that way above market no matter, how you measure.
He is the level of App downloads vis-a-vis the rest of the market.
You know, we just decided to present at this time because it so I'm.
So telling to us in terms of what the market shifts where that was taking place. So that's that's why we're really showing it but I don't know Hikmet, you Wanna add anything to add to that.
No I think the new customers you know the upside coming from the new customer definitely definitely people are low do their apps because they're searching for the money transfer you could see that acquisition from new customers and download from ABS, especially the mobile labs usage is really increasing the people are switching mode to mobile apps and our has been.
Improving and one on one benefit you have really a adapt our country by country region by region and not many companies can do that we haven't 75 countries. We do do you think marketing.
Has come to specific regulations, there the know your customer environments and the big marketing has been really adapting country by country that makes a huge competitive advantage. If you are and parts of Europe. You haven't been told me I know you go to to Russia, you have in Russian or do you booked to a U.S. you haven't ingo.
This part so I believe that's a you know that makes a difference that's why do you have quite a good downloads on the upside and.
Good so its leading position.
Great. Thanks, and then I just wanted to circle back to an earlier question on what you're seeing in your your digital transaction growth, which you know you're saying, it's 100 increased 2% and she just seen that's that's clear accelerating can you can you talk a little more about I just want understand the mix of those transactions.
You know coming from Europe come from Latin America Asia domestically here, yes, et cetera, how is that digital mix breaking out right now how is it maybe a little different now versus like a year ago and why it just just any color you can give us on digital transaction mix.
Called out would be great. Yeah, Yeah, Let me, let me give it a shot here you know what one interesting a beta point that is important I think for I wanted to understand is on our we dot com business first of all.
You know we continued to see declines in the domestic part of Western Union Dot com into broader company. So it's become a much smaller piece. So if you really look at the cross border asks that lets me dot com, it's almost 90%.
The other revenue so in terms of cross border.
So that's quite strong and the digital white label growth.
We dot com first of all coming from U.S. outbound and Europe outbound. So that's where we're getting a lot of the growth in dot Com and then for digital White label, we're seeing it obviously from the stair Bank partnership which is also into European numbers, and then also Saudi Telecom, which is not which is in the middle East.
African South Asian numbers, that's why you're seeing big mix shifts that are happening within those two regions and then how it all adds up to the total company and that's why I think that the transaction growth is likely to be staying at a higher level than where we see revenue grew up given all this digital mix. That's a that's been happening in the business. So I'm not sure if that is.
To your question, but is that helpful.
Yeah, that's great thanks very much.
The results.
Thank you.
Next question comes from Bryan Keane of Deutsche Bank. Please go ahead.
Hi, guys.
Congratulations on some of these numbers they look.
Quite impressive, especially in June and July with 20% plus cross border principal girls. So thanks for I guess I guess I'm just trying to understand you know maybe maybe to the World Bank, Kevin wrong that you know covert was gonna be hurt and maybe covert has a onetime positive impact or do you guys think it's more sustainable.
No.
You want to started in New York.
Yes, Okay I'll start the call. It environment is definitely the new Brian it's hard to read in because it will be as the world isn't that different place since Cobiz. My team started but one thing we know that its customers are coming mostly to digital and there are new to us and you know that the digital customer stay with us.
So that's great and part of that as you know the digital customers have a different.
Yeah different customer segment, they have to have a bank at comps or otherwise the concept money. They have a credit card so debit cards or a comp direct debit their accounts. So this is a neutral or they are staying without them. They are staying for a longer awesome you didn't up environment also what helps us.
Joe difficult present, our pay offs network and a P.M. that first article on pay off network helped us to acquire them I believe the growth of digital is going to continue to be that good healthy growth no is it or you know during albeit a longtime how I don't believe sorry, I think you have a good base.
The growth rates.
It's why we did most of you by year end guidance right you don't know what the impact to our business that met my screen packed looks like Ah, but I feel confident generally that we've talked through additional to new customers.
Got it and then just as a follow up thinking about the 20% growth you guys are seen universe, the market being down likely low single digit is that all explainable through you know the share your taken in digital or is there are things that are happening on the retail and as well that you're gaining share that.
It's creating that massive delta in different.
Yeah retail is also obviously customers are coming back in retail also we can see that and seem on some of the compared to just smaller combet dislocation, but close.
So almost a competition has baby enough to financial positioning that be habits I believe that.
Are you gaining some market share in retail no. It's no different base, obviously, the strong growth comes from digital rights, but you're also seeing principal mark achieved growth in retail.
Yeah, Brian in the in June and July I can tell you specifically that not only did we get more than 20% Cross border principal growth that we also saw cross border principal or grow slight growth I would say in retail itself.
So I think that supports what hikmet, we're saying and.
It's not going initially be true so the floor here, but certainly for the during the month of June and July So we've seen pretty good trends.
This concludes both the question answer session in the Western Union second quarter 2020 earnings release Conference call. Thank you for attending today's presentation. You may now disconnect.
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